Dropping an unprofitable customer will

ACCOUNTING

Multiple Choice

Dropping an unprofitable customer will

a. eliminate long-run costs assigned to that customer.

b. eliminate most short-run costs assigned to that customer.

c. decrease long-run profitability.

d. increase the potential to cross-sell other products that are more desirable.

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Customers are more valuable when they are all EXCEPT

ACCOUNTING

Multiple Choice

Customers are more valuable when they are all EXCEPT

a. well known in the community.

b. expected to continue to do business with a company.

c. in an industry with high-growth potential.

d. require special attention on a regular basis.

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Loss-causing customers

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Multiple Choice

Loss-causing customers

a. should be eliminated.

b. should be evaluated for ways to become profitable customers.

c. should be retained because each customer adds to long-run profitability.

d. do not exist because additional customer sales always increase profits.

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A common finding in many studies is that a high percentage of operating income is

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Multiple Choice

A common finding in many studies is that a high percentage of operating income is

a. contributed by a small number of customers.

b. contributed to evenly by most customers.

c. the result of high discounting.

d. the result of cooperative efforts by many low-volume customers.

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Corporate-sustaining costs should be allocated

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Multiple Choice

Corporate-sustaining costs should be allocated

a. to motivate changes in customer behavior.

b. to evaluate distribution-channel managers.

c. to determine the selling price that will cover all costs.

d. to identify the most profitable customers.

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When corporate-sustaining costs are fully allocated to distribution channels then the sum of the distribution-channel operating incomes

ACCOUNTING

Multiple Choice

When corporate-sustaining costs are fully allocated to distribution channels then the sum of the distribution-channel operating incomes

a. is less than company-wide operating income.

b. is equal to company-wide operating income.

c. is greater than company-wide operating income.

d. cannot be determined.

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If deciding whether to eliminate a distribution channel, allocating corporate-sustaining costs to distribution channels

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Multiple Choice

If deciding whether to eliminate a distribution channel, allocating corporate-sustaining costs to distribution channels

a. helps define cost reduction possibilities.

b. gives the misleading impression of potential cost savings.

c. identifies administrative inefficiencies.

d. evaluates the effectiveness of sales personnel.

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